You’re paying down debt. How long until you see an improvement in your credit score?

6 minute read

Credit scores get updated every one to two months depending on when your lenders report changes to your accounts. It can take a while to rebuild your score after debt hurts it, but checking your updates will let you know if you’re headed in the right direction.

Three readers asked questions about how often their credit scores are updated. Howard Dvorkin, CPA, and Debt.com chairman, answered.

How long does it take for your credit score to go up after paying a credit card?

Question: I had nearly $5,000 on four credit cards that I was carrying for years, but then I read what you had to say about getting rid of it [Reduce Credit Card Debt in 5 Easy Steps]. So I did that. Believe it or not, next month I should have everything paid off!

So thank you for that, but now I have a question: I need a new car and want to make sure my credit score takes into account how I paid off all my credit cards. I know that a higher credit score will mean a lower rate on a car loan. How long do I have to wait?

— Regina in Michigan

Howard Dvorkin answers…

The answer to your question is quite simple. The reason for the question is more complicated.

Thankfully, it doesn’t take long for news of your good deeds to spread. Most lenders, and that includes companies issuing credit cards, update their account information once a month. That means they report new information to the Big Three credit bureaus — Equifax, Experian, and TransUnion — every 30 days or so.

That said, I’d give it 45 days to ensure everything is logged everywhere. By then, your credit reports will be up to date. Your credit score is derived from that. However, you might not notice a bump in your score for months.

Since you’ve already followed one Debt.com report, I urge you to read another: How to Improve Your Credit Score Step-by-Step. You’ll find a more detailed explanation on how soon credit scores reflect improvements, plus steps for ensuring your hard work is recognized.

Is your credit rating holding you back? Find out how to fix it.

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That said, I’m concerned by your five words in your question to me: “I need a new car.”

Do you really?

One of Debt.com’s partners is Money Talks News, an excellent personal finance website run by Stacy Johnson. He owns a big house on the water in South Florida, owns a boat — and has never bought a new car in his lifetime. He even wrote an articled called Why I Don’t Buy New Cars, in which he writes, “Paying interest to finance a depreciating asset is not how you get rich.”

I’m focusing on this, Regina, because I see your situation all too often: You’ve just completed a Herculean task and paid off those stubborn credit card balances that have been dogging you for years. yet you’re ready to go right back into debt, this time for an auto loan.

Instead, I have a recommendation that I know will sound boring and parental: Buy a used car, and only as much as you can afford. It won’t be an attractive vehicle, but if you can sacrifice for just a little longer, you’ll have time to save money.

Paying off debt is worthy of applause, but if you can set aside money for an emergency fund and even retirement, then you deserve a standing ovation. Don’t stop now, Regina. Build on your success.

Will my score go up before I apply for a loan?

Question: I have a credit card that I can pay off in full, but how long after that will my credit score go up? I need to apply for a personal loan for school, but I need my score to go up before I do that. I know it varies by the source, but about how long after I completely pay off my card will my credit score reflect it? 

— Samantha in Tennessee

[Debt.com founder Howard Dvorkin]

A reader asks, I have the money to pay off my credit card now, but am not sure it’s worth it?

Well, Samantha it is most definitely worth it! When you pay off a credit card, your credit score improves. Why? Because five factors determine your credit score, and one of the biggest is the amount of debt owed. It is 30 percent of your overall score and the biggest chunk is payment history, which is short for – I pay my bill on time.

But more important than your credit score going up is that your debts are going down.

The AVERAGE credit card interest rate TODAY hovers around 17 percent. If you put all your money in the stock market – obviously a bad idea – you’d be hard-pressed to earn 17 percent on your investments. But if you pay off a credit card bill that has a monthly balance of $5,000, you could save up to $85 a month.

That’s $1,000 a year! And you don’t have to do anything to save that money, other than pay off a debt right now. If you don’t think you can afford to do that, call Debt.com today. We know how to make it happen.

Howard Dvorkin answers…

Short answer: There’s no way to know for sure, because the three credit bureaus — Equifax, Experian, and TransUnion — that decide your credit score have never explained their process in such detail.

Shorter answer: About 30-45 days, give or take. Most credit card companies update their account information once a month.

Longer answer: Depending on your circumstances, paying off your credit card won’t make much of a difference for a personal loan — which might be an unwise decision, anyway.

Let’s break this down.

First, there are many ways to boost your credit score. Check out How to Improve Your Credit Score Step-by-Step. If you really need to raise your score in a hurry, check out all your options.

Second, your credit score is based on five factors, but all of them aren’t equal. For instance, “payment history” is the biggest at 35 percent. That’s just a fancy way of saying, “I pay my bills on time.” The next biggest is “debt owed” at 30 percent. So paying off a credit card will definitely help you, but it’s still only 65 percent of the total.

It can also cost you, because 15 percent of your score is “length of credit history.” The credit bureaus like to see that you can maintain long-term relationships with your creditors. So in this case, if you pay off the card and close the account, that’s bad. You can, of course, leave the account open. Learn more at Understanding Your FICO Credit Score.

Third, and perhaps more importantly toward your overall financial situation, I worry about you taking out a personal loan to go to school. I don’t know if you mean college for the first time, or back to school after working for a few or many years.

Either way, I’d first suggest you explore other options, including scholarships. If you apply for many of those, you’re instantly eligible for the Debt.com Scholarship For Aggressive Scholarship Applicants, which is awarded every two months.

All that said, I feel very strongly about this: Anytime you can pay off a credit card and still maintain healthy finances, that’s one of the absolute best tactics for achieving financial freedom. So if you can afford to pay off a credit card, doing so is its own reward.

I settled my debt, but when will my credit score go up again?

Question: OK, so I had a student loan go delinquent, as well as two credit cards because of two years of not having steady employment. However, I have paid the settlement amounts on everything but my student loans — those I paid in full. My question is this, at what point will I start to see a change in my credit score?

I have two credit cards with low balances that I pay off all transactions in full on time every month. I just want my credit score to improve sooner rather than later. The last two years have been brutal, but I’m back on track now.

— R. Michele

Howard Dvorkin CPA answers…

The simple answer, Michele, is: You should see some improvement within six months of paying off those student loans and behaving responsibly with your credit cards. Every day that you make good credit decisions, your credit score will improve.

Of course, little in life is all that simple, especially when it comes to money. Fortunately, it’s not all that confusing, either. Let’s break it down in three easy steps…

 1. There’s “good” debt and “bad” debt

What makes debt “good”? It’s debt you paid off as you agreed to do. The three big credit bureaus — Equifax, Experian, and TransUnion — base their scores on how well you handle your debt. If you have no debt at all, you can have problems. Last year, one Debt.com intern recounted her problems getting a credit card because she had no credit history. She was 19 and had always used cash.

“Bad” debt is much easier to spot: You run up huge credit card bills that you can’t afford to pay off, and you end up getting harassed by debt collectors.

The lesson here: The longer you have a history of good debt, the better your credit score.  This is a good reason not to close old accounts where you’ve had a solid repayment record.

2. The four most important words are “debt-to-income ratio”

This is the single most important personal statistic you can know. DTI is simply how much of your gross income is needed to pay your debts. Ideally, you want it to be as low as possible, but this being the real world, I usually recommend no more than 30 percent.

If you want to figure out your DTI ratio, Debt.com has a handy Debt-To-Income Ratio Calculator that can do it for you.

3. You can get free help

Even if you’ve clawed your way out of your major debt, you can always use some advice on how to pay off the rest, get ahead on savings, or make sure your credit score has no mistakes. Call us for a free analysis at . Good luck, Michele, you’re on the right track.

Is your credit rating holding you back? Find out how to fix it.

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About the Author

Howard Dvorkin, CPA

Howard Dvorkin, CPA

I’m a certified public accountant who has authored two books on getting out of debt, Credit Hell and Power Up, and I am one of the personal finance experts for Debt.com. I have focused my professional endeavors in the consumer finance, technology, media and real estate industries creating not only Debt.com, but also Financial Apps and Start Fresh Today, among others. My personal finance advice has been included in countless articles, and has appeared in the New York Times, the Washington Post, Forbes and Entrepreneur as well as virtually every national and local newspaper in the country. Everyone should have a reason for living that’s bigger than themselves, and besides my family, mine is this: Teaching Americans how to live happily within their means. To me, money is not the root of all evil. Poor money management is. Money cannot buy happiness, but going into debt always buys misery. That’s why I launched Debt.com. I’m glad you’re here.

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Howard Dvorkin, CPA

CPA and Chairman

Published by Debt.com, LLC